Contact Energy - CEN Chart

**fish** · 15-07-2018, 04:35 PM

Originally Posted by Joshuatree

Timely, thanks Gonzo. Our hydro stand us in good stead to help ameliorate future demand, usage, tech but with the Govt reviewing the sector, there has to be a little worry re the possibility of price caps/ intervention etc. And Winston did want to buy them back at one point. He made his point about them being majorly sold off in the first place(Contact ? being the exception).

Has Gonzo removed the post?

It made me look at happenings in the UK-2 new nuclear power stations,new windfarms-all with government subsidies and guaranteed sales at inflated prices
Govt intervention more often than not will screw up a system thats working.
Even if it doesnt directly it scares the market.
I feel we will always need gas generation peakers.
Our population is growing but who would build new thermal generation with present govt policies?

**Gonzo** · 16-07-2018, 10:39 AM

article that was redacted was about power generation companys in the UK
https://www.thetimes.co.uk/article/t...unds-pqz77v8ts

**Hectorplains** · 16-07-2018, 11:57 AM

Originally Posted by Gonzo

article that was redacted was about power generation companys in the UK
https://www.thetimes.co.uk/article/t...unds-pqz77v8ts

There is no mention of power companies in that link? The confusion grows!

**Hectorplains** · 17-07-2018, 10:18 AM

p5 from today's Trustpower Investor Day presentation - http://nzx-prod-s7fsd7f98s.s3-websit...928/282883.pdf

This provides the counterargument to the gloom story around generators. It's the retail end that they foresee having problems, "Electricity segment remains highly competitive with consolidation andfailures likely" (see slide 11)

**ben28** · 17-07-2018, 10:54 AM

https://www.thetimes.co.uk/article/d...aurs-jvzb5vfml
Believe this is the article

**RTM** · 17-07-2018, 01:33 PM

Originally Posted by ben28

https://www.thetimes.co.uk/article/d...aurs-jvzb5vfml
Believe this is the article

Yes, that’s the one, thanks Ben.
Worth having a look at the comments on the article as well.
In particular, Peter Prior”s.

**Snoopy** · 17-07-2018, 01:41 PM

Originally Posted by ben28

https://www.thetimes.co.uk/article/d...aurs-jvzb5vfml
Believe this is the article

Thanks Ben. That is an article about the power sector in Britain.

"Utilities, traditionally among the strongest beasts in the corporate world, are under attack from all angles as governments threaten price caps, new rivals undercut their prices, carbon taxes squeeze margins and renewable power technologies plunge in price."

In New Zealand new power generation is built with no government funding, because power is charged at the highest incremental rate needed to meet demand in a deregulated power market. If an energy power price cap was introduced, then the government would have to start installing new power generation equipment because it would be unprofitable for any private company to do it.

Carbon taxes have already caused the demise of Contact's Otahuhu gas fired station, now effectively replaced by the Te Mihi Geothermal generation station. Most of our generation in NZ is renewable anyway. Yes solar is getting cheaper. But solar generation is mismatched to NZs peak power requirements. So it needs battery technology to store the power. And batteries have a finite life and present their own end of life disposal challenges. By contrast a hydroelectric 'battery' (a dammed water resource) has a life of thousands if not millions of years.

Sure new retailers have come on the scene and cut prices. But those retailers without generation capacity have a tough job securing long term energy supplies from others. In summary, there is nothing in that first paragraph of the article that makes me want to subscribe to read the rest. It doesn't look like there is much lesson to be learned here that is applicable to the NZ market.

SNOOPY

**Snoopy** · 19-07-2018, 01:57 PM

Originally Posted by Snoopy

Horus, if more localized power generation is the way to go in the future, like roofloads of solar panels, then what is to stop Contact 'renting' roofspace in Mangere, and opening up the "David Lange Memorial Power Station", a joint initiative with Pacifica people. Contact owns the panels and gets (most) of the benefit.

As I see it the main 'threat' from distributed generation and battery storage is actually to the lines companies, not the gentailers.

I was under the misapprehension that lines companies could not sell power. But after receiving an offer from my lines company to supply energy, I have been reeducated.

https://www.ea.govt.nz/dmsdocument/9541

It seems that under the Electricity Industry Act 2010, my lines company is allowed to sell me power after all. It is all a bit hush hush though, because the total amount of power they can sell per year appears to be limited to 75GWh per year or 75,000MWh /year. Yet there are quite a few lines companies throughout the country. So there is a bit more competition for the likes of Contact out there than I realised.

SNOOPY

**Snoopy** · 31-07-2018, 01:44 PM

Originally Posted by Snoopy

The gas storage facility definitely gives CEN an advantage over MRP in terms of having better control of the gas input price. Then we have Contact's Rockgas subsidiary selling gas directly to customers to burn. That gives an alternative path to market for Contact's gas which the likes of MRP does not have. I am still figuring out how direct gas selling affects the overall profitability picture.

Announcement to the NZX today

--------

TRANSACT

31 July 2018

Sale of Contact’s LPG business Rockgas

Delivering on our strategy through portfolio optimisation

Contact has entered into an agreement to sell 100% of the shares in Rockgas Limited (Rockgas) to Gas Services NZ Midco Limited (GSNZ) an associate of First Gas Limited (First Gas), for a cash consideration of $260 million after an extensive competitive sales process.

<snip>

As part of the transaction, Contact will enter into an exclusive marketing alliance with GSNZ to be able to continue to offer LPG to mass market customers. In addition, Contact will enter into a services agreement to provide call centre and billing services for mass market LPG customers.

<snip>

The sale proceeds will strengthen our balance sheet and facilitate improved distributions to shareholders. Contact expects that post completion of the transaction the S&P net debt / EBITDAF ratio will fall comfortably below the target 2.8x.

<snip>

Contact entered the LPG market in 2007, through the purchase of Rockgas from Origin Energy (who held a majority shareholding in Contact) for $156 million, during the first year of operation, EBITDAF was $20m. The average annual EBITDAF for the period under ownership was $22 million, with a range of $13 million to $35 million.

During the period of ownership, Contact improved the integrity, reliability and costs of operation with operating costs down by $5 million which along with significant improvements to fuels procurement and consolidation of bulk distribution and shipping along with lower product costs saw FY18 earnings before interest, tax, depreciation and fair value adjustments in financial instruments (EBITDAF) of $32 million (unaudited).

About Gas Services New Zealand

GSNZ provides operational services for First Gas and other customers. GSNZ operates one of New Zealand’s largest gas networks. GSNZ and Contact are currently working to satisfy the conditions to complete the sale of the Ahuroa gas storage facility to GSNZ.

--------

Ah well, I won't have to bother to understand the Rockgas business any more! Who owns GSNZ? Anyone know?

SNOOPY